Government Finance Statistics Manual 2014

146 Government Finance Statistics Manual 2014

dissemination of general information, technical docu-

mentation, and statistics. Consequently, the expenditure

of these ministries has to be shared across the classes

for which they are responsible. For example, the expen-

diture of a ministry of transport should be divided be-

tween road transport (70451), water transport (70452),

railway transport (70453), air transport (70454), and

pipeline and other transport (70455).

Administrative Expenditure

6.144 Administrative expenditure on general ser-

vices, such as personnel services, supply and purchas-

ing services, accounting and auditing services, and

computer and data processing services, undertaken

by ministries or units within ministries should be

classifi ed at the most detailed level possible. If admin-

istrative expenditure overlaps two or more classes, an

attempt should be made to apportion expenditure be-

tween the classes concerned. If this approach is not

feasible, the total should be allocated to that class that

accounts for the largest part of the total expenditure.

Subsidies.

6.145 Particular diffi culties may arise with regard

to subsidies. Th e main objective behind such govern-

ment support may be, for example, to assure capac-

ity to build naval vessels considered vital to national

defense, to maintain living standards of important

groups such as farmers or miners, or to provide em-

ployment for workers in underutilized hospitals.

Th ese political objectives are not to be confused with

functions as the term is used in COFOG. Hence, a

government subsidy to shipyards is classifi ed under

manufacturing (70442), and grants to hospitals are

classifi ed under hospital services (7073) regardless of

the ultimate purposes. Subsidies and grants designed

chiefl y to increase employment opportunities in gen-

eral are an exception to this rule. Because such pro-

grams do not focus on any single industry, they are

classifi ed under general labor aff airs (70412).

Consumption of Fixed Capital

6.146 It is likely that consumption of fi xed capital

will be diffi cult to allocate by function, especially if

only aggregated fi gures for total government capital

stock and consumption of fi xed capital are compiled.

In these circumstances, approximations will have to

be used. One possibility may be to distribute con-

sumption of fi xed capital according to book value de-

preciation, if it is available for detailed organizational

units within government. Another approach would

be to distribute consumption of fi xed capital among

functions in proportion to the net acquisition of fi xed

assets over a number of earlier years.

6.147 Another caution regarding the use of

COFOG statistics relates to net investment in non-

fi nancial assets. Because expenditure classifi ed by

COFOG includes consumption of fi xed capital as an

expense, and includes it in the calculation of net in-

vestment in nonfi nancial assets (deducted from ac-

quisition minus disposals), the consumption of fi xed

capital will net out in COFOG data. However, if a

functional classifi cation is compiled for expense items

only, this will include consumption of fi xed capital

representing part of the resource cost of using previ-

ously acquired fi xed assets.

Cross-Classifi cation of Expenditure

6.148 Th e economic and functional classifi cations

of expenditure can be cross-classifi ed as illustrated

in Table 6A.2. A cross-classifi cation of COFOG with

each of the categories of the economic classifi cation of

expense is analytically useful. Th e cross-classifi cation

allows an analysis of:

• Th e inputs, which show how governments per-
  form their functions, and the outputs, which
  show what governments are doing


• How governments carry out their public expen-
  diture policy functions to meet social objectives


• Th e changes in the composition of expenditure
  over time to serve specifi c policy objectives


• Comparison of how specifi c functions are car-
  ried out by diff erent governments.
  6.149 Table 6A.2 includes a column for each major
  economic type of expense and for net investment in
  nonfi nancial assets. As indicated earlier, this classifi -
  cation is needed to compile data on the actual fi nal
  consumption of the general government and house-
  holds (see paragraph 6.139).

Detailed Classifi cation of the Functions of Government

6.150 As outlined earlier, the complete Classifi ca-

tion of the Functions of Government (COFOG) has

three levels of detail: Divisions, Groups, and Classes.